SHRI ALOK AGARWAL,MUMBAI vs. ACIT, CIRCLE 14(1)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER) ITA 7111/MUM/2025 Assessment Year: (2017-18) SHRI ALOK AGARWAL ACIT, CIRCLE 14(1)(2) 1001, EMERALD HEIGHTS, PLOT NO. ROOM NO. 455, 4 TH FLOOR, 32, UNION PARK, OFF SION AAYAKAR BHAVAN, M.K.ROAD. Vs. TROMBAY ROAD, CHEMBUR EAST., MUMBAI-400020, MAHARASHTRA MUMBAI-400071, MAHARASHTRA Appellant Respondent

PAN No. AAGPA7518M

Appellant represented by: Shri Vimal Punmiya, CA Respondent represented by: Shri Surendra Mohan (SR. DR.) Date of hearing: 07-09-2026 Date of pronouncement: 11-09-2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against the order dated 18.09.2023 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["Ld. CIT(A)"], for Assessment Year 2017-18, whereby the order of assessment dated 11.12.2019 passed under section 143(3) of the Income-tax Act, 1961 ["the Act"] was confirmed. The grounds of appeal, as raised, read as under:

“1.1 The National Faceless Appeal Center ('the NFAC') erred in confirming the assessment order dated 11 December 2019 passed by the Income tax Assistant Commissioner of Income tax Circle 14 (3) (2), Mumbai ('the A.O.')

without affording proper, sufficient and adequate opportunity of being heard to the Appellant in the course of assessment proceedings. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment order so passed by the A.O. be held as bad and illegal, as the same was framed in breach of the principles of natural justice. WITHOUT PREJUDICE TO THE ABOVE: 2. Re.: Long term capital gains of sale of property situated at Ekta Hyde: 2.1 The NFAC erred in confirming the action of the A.O. in computing long term capital gain at Rs. 2,18,82,594/- on sale of property situated at Ekta Hyde as. against the long term capital gain of Rs. 1,25,55,030/- computed by the Appellant. 2.2 While doing so, the NFAC erred in confirming the action of the A.O. in not granting deduction of the following expenditure while computing long term capital gain tax liability: (i) Maintenance Charges Rs. 3,96,360/- (ii) Bank Interest Rs. 40,19,048/- (iii) Parking Rs. 8,00,000/- (iv) Registration Charges Rs. 30,000/-.”

2.3. The NFAC failed to appreciate that the above mentioned amounts were incurred by the Appellant for acquiring the property and were deductible under section 48 (ii) of the Income Tax Act, 1961 ('the Act'). 2.4. It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 3. Re.: Addition under section 69B - Unexplained investments: 3.1 The NFAC erred in confirming the addition of Rs. 79,50,528/- made by the A.O. under section 69 B of the Act alleging Appellant had unexplained investment in property situated at Ekta Hyde. 3.2 While doing so, the NFAC failed to appreciate that: a. the provisions of section 69 B of the Act were not at all applicable in the facts and circumstances of Appellant's case. b. the addition invoking the provisions of section 69 B of the Act were made by the A.O. merely on the basis of surmises, conjecture and suspicion without bringing on record any cogent material / evidence to support the alleged addition. 3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.

(i) Addition of Rs.93,27,564/- under the head LTCG on sale of property.

(ii) Addition of Rs.79,50,528/- on account of unexplained investments by invoking the provisions of Section 69B of the Act.

(iii) Addition of Rs.3,19,33,725/- under the head LTCG on sale of shares.

“Ground No. 2-Computation of Long-Term Capital Gain on Sale of Property The appellant sold an office premises situated at Ekta Hyde Saki Vihar Road. Marol. Andheri (East). Mumbai, to M/s Ebco Pvt Ltd for a consideration of Rs.4 11.61.000/- vide agreement dated 02.08.2016. Against the said transaction, the appellant declared long-term capital gain of Rs 1 25.55 030/-. In doing so. the appellant adopted cost of acquisition of Rs. 1,60,70,198/-. This cost included not only the purchase price of Rs. 1.08.30 180/- as per agreement dated 23:04 2008 but also additional amounts claimed as capitalization, namely, adhoc maintenance charges of Rs.3,96,360/-, bank interest of Rs. 40, 19,048/-, parking charges of Rs.8,00,000/-, and registration fees of Rs.30,000/-. The Assessing Officer, after detailed examination, held that maintenance charges and bank interest do not qualify as cost of acquisition or improvement under section 48. He further noted that no contemporaneous documentary evidence was produced regarding parking charges, the purchase agreement was silent and no proof of payment to builder was furnished. The registration fees were claimed to be paid in cash without adequate proof. Accordingly, AO restricted cost of acquisition to Rs. 1,08,30,180/- and recomputed indexed cost, resulting in LTCG of Rs.2,18,82,594/- as against Rs.1,25,55,030/- declared. The difference of Rs.93,27,564/- was added to income. In appellate proceedings, the appellant reiterated that the above amounts were genuinely incurred, duly reflected in audited accounts since 2009, and therefore form part of cost of acquisition. It was contended that interest on loan capitalized forms part of cost, and reliance was placed on judicial precedents. The appellant also filed copies of bank statements, builder's letters and ledger accounts to support the claim. The matter has been carefully examined. Section 48 lays down the mode of computation of capital gains. The scope of "cost of acquisition" has to be construed strictly. Maintenance charges paid to society are recurring revenue expenditure and cannot be regarded as cost of acquisition. Interest claimed was not substantiated with sanction letters or loan accounts. The builder's letter regarding parking space was not part of the original agreement and is evidently a later document. Registration charges claimed in cash were not corroborated. Therefore, the AO rightly restricted cost to the agreement value. The appellant's reliance on case laws is misplaced because those were cases where there was clear evidence of capitalization of loan interest, unlike in the present case. Accordingly, the addition of Rs.93,27,564/- is confirmed. Ground No. 3- Addition u/s 69B for Unexplained Investment During the course of assessment, it was noticed by the Assessing Officer that the appellant sold an office property situated at Ekta Hyde, Saki Vihar Road, Marol, Andheri (East), Mumbai to M/s. Ebco Pvt. Ltd. vide registered sale agreement dated 02.08.2016. The total area reflected in the said sale agreement was 227.38 sq. mtrs. The Assessing Officer compared this with the registered purchase agreement executed at the time of acquisition of the property in April 2008 and found that the purchase document recorded only 183.46 sq. mtrs. of office space. There was therefore a differential area of 43.92 sq. mtrs, which was sold by the appellant but was not part of the original purchase agreement.

The appellant, when confronted, explained that this additional area comprised appurtenant space, namely 17.25 sq. mtrs. of air handling units and 26.67 sq. mtrs. of niches. It was claimed that although these areas were not specifically mentioned in the registered purchase agreement, they were always in the exclusive possession and enjoyment of the appellant, and to corroborate this, the appellant produced a letter dated 01.07.2016 issued by the builder M/s. Ekta Supreme Corporation acknowledging the appellant's right over the said area. On this basis, the appellant argued that there was no fresh investment made and therefore no question of unexplained investment arose. The Assessing Officer examined this explanation carefully. He noted that the builder's letter was dated 01.07.2016, barely one month prior to the sale transaction dated 02.08.2016. There was no evidence on record to show that at the time of purchase in 2008, the appellant had any legal right over the additional 43.92 sq. mtrs. of space. The original registered purchase agreement is the only valid document evidencing acquisition of rights, and it was absolutely silent on this aspect. The appellant's claim of continuous possession is not supported by any contemporary documentary evidence such as maintenance bills electricity bills municipal records or property tax documents showing recognition of such area of this additional area was recorded in the appellant's books of account The audited The Assessing Officer also observed that no cost of acquisition in respect mtrs. of space. Thus, in terms of section 698 of the Act when the Assessing Officer finds that an investment has been made by an appellant but the amount expended on accounts of the appellant did not reflect any investment relatable to this 43.92 so deemed to be the income of the appellant Here it was evident that the appellant had such investment exceeds the amount recorded in the books the excess may be The investment corresponding to 43.92 sq. mtrs, was not explained or disclosed transferred 227.38 sq. mtrs, but disclosed cost of acquisition only for 183.46 sq. mtrs. the rate of sale consideration. The total sale consideration was Rs.4.11.61.000/- for In order to quantify the unexplained investment, the Assessing Officer adopted 227.38 sq. mtrs., which translated to Rs 181 022/- per sq. mtr Applving this rate to the differential area of 43.92 sq. mtrs, the value of Rs. 79 50528/- was worked out This amount was treated as unexplained investment u/s 69B and added to the appellant's income. In appellate proceedings, the appellant has argued that there was no fresh investment and that the additional area was always in his possession. It was contended that the builder's letter confirmed the appellant's rights, and that merely because the purchase agreement did not mention the area does not mean that the appellant did not own it. The reply of the appellant has been carefully considered but cannot be accepted. The contention that the area was always in possession is a bald assertion uncorroborated by any independent evidence. The letter relied upon was obtained from the builder just one month before the sale: its timing itself raises serious doubts about its genuineness. A registered purchase deed is a legally enforceable document which confers ownership rights, and in the absence of such recognition, a self-serving letter has no evidentiary value. Furthermore, even if it is accepted for a moment that the appellant was using such area, the question remains as to what consideration was paid for acquiring it. The appellant has not shown any amount debited in books of account toward acquisition of 43.92 sq. mtrs. The audited accounts do not record such investment. Section 69B is attracted precisely in such circumstances where the investment is not recorded in the books but is discovered through external evidence. It is a settled principle that onus lies on the appellant to explain the source and cost of investment. In the present case, no satisfactory explanation has been given. and the addition of Rs.79,50,528/- u/s 698 is accordingly sustaineda The AO has rightly applied the sale rate to determine the unexplained investment. Ground No. 4 - Disallowance of Long-Term Capital Loss on Shares The appellant claimed long-term capital loss of Rs.3,19,33,725/- on sale of shares of Dexi Education Services Ltd. The Assessing Officer called for details of purchase and sale of such shares, including allotment letters, share transfer deeds, computation of cost, and proof of sale consideration. On examination, the AO noted that as per the documents produced, the appellant was allotted 735 equity shares and 35,800 preference shares on 23.11.2010. The cost of these shares was Rs.63,00,095/- only. However, in the computation of long- term capital loss furnished by the appellant, the cost was shown at Rs. 2,01,85,906/- and after indexation, a figure of Rs.3,19,39,725/- was adopted, Thus, the appellant had inflated the cost of acquisition more than three times as compared to what was supported by the allotment letters. Further, the appellant claimed that during the year under consideration, the shares were sold in a distress transaction for Rs.6,000/- to one Mr. Navin Bhavani Shankar. When asked to substantiate this, the appellant could not produce any valid transfer deeds, demat statements, broker contract notes, or even confirmation from the alleged purchaser. There was no evidence that any consideration was actually received through verifiable banking channels. The AO, therefore, concluded that the so-called sale transaction was not genuine and that the appellant had manipulated figures to claim a fictitious capital loss to set-off against other capital gains. In appellate proceedings, the appellant submitted that the promoters of Dexl Education Services Ltd. had absconded, the company had gone into financial turmoil, and therefore the investment had become worthless. It was contended that police complaints and civil suits were filed for recovery, but ultimately there were no buyers and hence shares were sold in distress. It was further argued that purchase consideration was paid through banking channels at the time of allotment and hence the claim should be accepted. The contentions of the appellant are not acceptable. Firstly, the most glaring fact is the discrepancy between cost figures. The allotment letters clearly show cost of Rs.63,00,095/- whereas the appellant has claimed cost of Rs.2,01,85,906/-. No evidence whatsoever has been produced to explain how this inflated figure has been arrived at. This itself renders the computation unreliable. Secondly, the alleged sale It is a settled proposition that the burden of proving genuineness of a loss lies on the appellant who claims it. In the present case, there is complete failure to discharge this burden. The AO was fully justified in disallowing the claim of long-term capital loss of Rs.3.19.33.725/-, Allowing such unsubstantiated claim would result in creating artificial losses to wipe off genuine taxable income. which cannot be permitted. Accordingly, the addition is upheld. In view of the detailed discussion above and on an overall consideration of the assessment order, appellant's submissions, and material on record, it is evident that the additions made by the AO are based on sound reasoning, facts and law. The appellant has failed to rebut the findings with credible evidence. All grounds of appeal are dismissed. 6.2 In the result, the appeal is dismissed.” 4. Before us, the Ld. Authorised Representative for the assessee moved an application under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, seeking admission of additional evidence at pages 121 to 278 of the paper book, comprising, inter alia: confirmation from and identity documents of Shri Navin Bhavanishankar; the letter of allotment and share certificates issued to the assessee; bank statements evidencing payment towards purchase of the shares; correspondence and allotment details concerning one Shri Pradeep Sharma; the MCA master data, Form 2, Form 23AC, and audited financial statements of Dexl Education Services (India) Ltd.; a working showing the negative valuation of the said company; and complete copies of the purchase agreement dated 10.04.2008 and the sale agreement dated 27.07.2016 relating to the Ekta Hyde property.

Order pronounced in the open Court on 11/09/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 11/09/2026 M. Ranganath Vittal , Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai